Why don’t people understand that low rates work against them?

[Anonymous]

Anonymous wrote:I don’t agree with any of this. Sure if rates go up you (specifically) may buy less house (to keep monthly pmt the same) but it’s not like there won’t be a buyer for the $1.5 mil house that sold when rates were lower. It just may be a different person. In some areas of the country, the distribution of buyers may be degenerate (no pun intended) but probably not here in the DMV. A richer person will buy that house at a higher rate just like you’ll buy a cheaper house too.

I think this is right. New buyers will buy less; those trading up will go up half a step rather than a full step. But as long as demand outstrips supply, all these houses will sell, just to different people who make more money than the people they previously would've sold to. There are plenty of buyers at all price points now; everyone'll just move one category to the left.

At the top of the scale, I suspect that the market isn't much affected by interest rates. If you're spending $10m on a house you're probably not sweating the interest. At the bottom, the cheapest houses will require more income, so that may soften. I would expect rental rates to rise slightly, and the number of first-time-homebuyers to fall slightly. But for everything in the middle, I don't think the change will be huge.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP is dumb. Low supply with high demand leads to increased prices. It's a supply issue, not an interest rate issue. But OP is too enamored with himself to look beyond his middle school reasoning.

Dumb or not, I’m saying the truth. You’re so scared by that truth that you resort to bullying. You clearly have middle school mentality and development. Maybe you are just a tween. Best I not deal with minors such as yourself.

And who told you I’m a ‘he’? You in love with your daddy?

Wow, the "higher interest rates don't matter" posters are wild. Who knew.

I don’t think they’re wild, just bad actors. Every real estate agent I know would tell you ‘it’s a great time to buy! Rates are so low!’

[Anonymous]

Anonymous wrote:

Anonymous wrote:I don’t agree with any of this. Sure if rates go up you (specifically) may buy less house (to keep monthly pmt the same) but it’s not like there won’t be a buyer for the $1.5 mil house that sold when rates were lower. It just may be a different person. In some areas of the country, the distribution of buyers may be degenerate (no pun intended) but probably not here in the DMV. A richer person will buy that house at a higher rate just like you’ll buy a cheaper house too.

I think this is right. New buyers will buy less; those trading up will go up half a step rather than a full step. But as long as demand outstrips supply, all these houses will sell, just to different people who make more money than the people they previously would've sold to. There are plenty of buyers at all price points now; everyone'll just move one category to the left.

At the top of the scale, I suspect that the market isn't much affected by interest rates. If you're spending $10m on a house you're probably not sweating the interest. At the bottom, the cheapest houses will require more income, so that may soften. I would expect rental rates to rise slightly, and the number of first-time-homebuyers to fall slightly. But for everything in the middle, I don't think the change will be huge.

Houses in the 1.5-2M range will suffer most. Higher interest rates affect larger principles more. Lower-end houses will always have demand.

[Anonymous]

Higher rates are certain to affect demand for any house that bought with a mortgage. (And that is putting aside the other market factors that often come with higher rates, specifically lower stock prices, which can affect demand.) Whether that creates lower prices depends on the overall supply/demand situation, but higher rates is certainly not good for home values.

If rates go high enough, then you will start to be concerned about flippers unloading inventory, people with ARMs resetting and balloon payments, and other things that could affect the supply and cause a cascade that brings down prices overall. I think we are a long way from that though.

[Anonymous]

Anonymous wrote:If you could buy a $1,000,000 million house at 4%, with a monthly payment of about $4,700 per month, when the rates hit 3% the price goes promptly to 1,250,000, with a monthly payment of roughly $5,300.

So your principal is higher, and your payment, all in the name of lower rates.

https://www.calculator.net/payment-calculator.html

low rates equal high prices..I dont think its promptly but you are right! your rate can always be refied down the road but the price you purchase never changes. this is how people go under. this is not a good time to buy!

[Anonymous]

This whole thread ignores the point that people don't buy their house solely as an investment. They but it as a place to live.

If I am investing, yes, I stand to lose if I buy an asset at $1,000,000 at 3%, and then rates go up to 4%. That's bad.

As a homeowner, I can buy a nicer place to live for a lower monthly cost if rates are lower. That's good!

[Anonymous]

Anonymous wrote:This whole thread ignores the point that people don't buy their house solely as an investment. They but it as a place to live.

If I am investing, yes, I stand to lose if I buy an asset at $1,000,000 at 3%, and then rates go up to 4%. That's bad.

As a homeowner, I can buy a nicer place to live for a lower monthly cost if rates are lower. That's good!

This whole post ignores the relationship low interest rates have had to listing price during the last decade.

[Anonymous]

Thanks, Oklahoma City or Omaha or wherever you live where this theory appears to be true.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This whole thread ignores the point that people don't buy their house solely as an investment. They but it as a place to live.

If I am investing, yes, I stand to lose if I buy an asset at $1,000,000 at 3%, and then rates go up to 4%. That's bad.

As a homeowner, I can buy a nicer place to live for a lower monthly cost if rates are lower. That's good!

This whole post ignores the relationship low interest rates have had to listing price during the last decade.

There is not a 1:1 relationship. The mortage payment on a $1 million loan at 4% is $4,770. If rates drop to 3%, that $4,770 will cover a mortgage of $1.13 million - 13% higher.

But if rates drop from 4% to 3%, housing prices don't automatically go up by 13%. They probably go up 6 or 7%.

So two people win here - the person selling the house, who gets 6% more, and the person buying the house, who gets more house for the same money.

[Anonymous]

Anonymous wrote:This whole thread ignores the point that people don't buy their house solely as an investment. They but it as a place to live.

If I am investing, yes, I stand to lose if I buy an asset at $1,000,000 at 3%, and then rates go up to 4%. That's bad.

As a homeowner, I can buy a nicer place to live for a lower monthly cost if rates are lower. That's good!

As a homeowner you buy a home as a place to live and as a savings account, so as a homeowner you want low rates high prices. But as a buyer you are better with higher rate and lower prices.

[Anonymous]

Anonymous wrote:

Anonymous wrote:This whole thread ignores the point that people don't buy their house solely as an investment. They but it as a place to live.

If I am investing, yes, I stand to lose if I buy an asset at $1,000,000 at 3%, and then rates go up to 4%. That's bad.

As a homeowner, I can buy a nicer place to live for a lower monthly cost if rates are lower. That's good!

As a homeowner you buy a home as a place to live and as a savings account, so as a homeowner you want low rates high prices. But as a buyer you are better with higher rate and lower prices.

And to clarify, as a homeowner at the time of sale. Otherwise, lower rates will contribute to higher prices and higher taxes for the homeowner who’s not selling. High prices are important for a homeowner only at cash out. And high prices are also false reassurance. Nothing guarantees a high price at time of sale.

These trolls on DCUMD think that by bullying the ‘low rates bad’ thinking they are assuring that their prices never drop. Wait until section 8 housing is build next to you, and then you’ll see.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This whole thread ignores the point that people don't buy their house solely as an investment. They but it as a place to live.

If I am investing, yes, I stand to lose if I buy an asset at $1,000,000 at 3%, and then rates go up to 4%. That's bad.

As a homeowner, I can buy a nicer place to live for a lower monthly cost if rates are lower. That's good!

As a homeowner you buy a home as a place to live and as a savings account, so as a homeowner you want low rates high prices. But as a buyer you are better with higher rate and lower prices.

And to clarify, as a homeowner at the time of sale. Otherwise, lower rates will contribute to higher prices and higher taxes for the homeowner who’s not selling. High prices are important for a homeowner only at cash out. And high prices are also false reassurance. Nothing guarantees a high price at time of sale.

These trolls on DCUMD think that by bullying the ‘low rates bad’ thinking they are assuring that their prices never drop. Wait until section 8 housing is build next to you, and then you’ll see.

What the hell are you blathering about? This entire thread is pure nonsense.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:This whole thread ignores the point that people don't buy their house solely as an investment. They but it as a place to live.

If I am investing, yes, I stand to lose if I buy an asset at $1,000,000 at 3%, and then rates go up to 4%. That's bad.

As a homeowner, I can buy a nicer place to live for a lower monthly cost if rates are lower. That's good!

As a homeowner you buy a home as a place to live and as a savings account, so as a homeowner you want low rates high prices. But as a buyer you are better with higher rate and lower prices.

And to clarify, as a homeowner at the time of sale. Otherwise, lower rates will contribute to higher prices and higher taxes for the homeowner who’s not selling. High prices are important for a homeowner only at cash out. And high prices are also false reassurance. Nothing guarantees a high price at time of sale.

These trolls on DCUMD think that by bullying the ‘low rates bad’ thinking they are assuring that their prices never drop. Wait until section 8 housing is build next to you, and then you’ll see.

What the hell are you blathering about? This entire thread is pure nonsense.

Who says so? You? What are your qualifications?

[Anonymous]

OP please explain what you mean by prices increase “promptly to 1.25m”. I think this is why PPs are saying it’s dumb. Prices are driven by people’s affordability. If I can afford $4700 today at 3% then that’s all I can afford at 4% too.

[Anonymous]

Anonymous wrote:OP please explain what you mean by prices increase “promptly to 1.25m”. I think this is why PPs are saying it’s dumb. Prices are driven by people’s affordability. If I can afford $4700 today at 3% then that’s all I can afford at 4% too.

I think what OP is trying to say is that the same house that would've cost you $4200 at 3% will cost you $4700 at 3%.

However, it's not true. Interest rates have, proportionately, gone down far more than prices have gone up in most areas. And I find bizarre the whole "you can always refinance". That's assuming that the higher rate gives you a proportionate discount. It really doesn't.

Of course, YMMV. In the market I'm in, housing prices have increased slightly while interest rates have plunged. I'm in a house right now that I could not have afforded five years ago (and there's plenty of market data to tell me what it would have gone for 5 years ago). So I'm pretty thrilled about the low rates!